Stock market’s record run sets stage for December gains, pros say

The market’s record year may have more room to go, with sentiment boosted by recent outperformance and historical trends.

Stocks hit all-time highs following President-elect Donald Trump’s victory earlier this month, as Wall Street remains optimistic about the incoming administration’s economic agenda despite looming tariff risks.

“Tariff threats may lead to near-term market volatility, but the fundamental backdrop remains supportive,” Mark Haefele of UBS Global Wealth Management wrote in a note to clients on Wednesday.

This year, the S&P 500 (^GSPC) hit more than 50 all-time closing highs, while the Dow Jones Industrial Average (^DJI) and Nasdaq 100 (^NDX) are not far behind.

Looking ahead, strategists suggest that the market’s bull year may end on a positive note.

“At this point, you can’t deny that everything looks positive,” Michelle Schneider, chief strategist at MargetGuage.com, told me on Yahoo Finance’s morning show, adding that investors should “stay with the momentum and stay with the trend.”

Using history as a guide, the odds are that this trend is on the upside. According to CFRA’s Sam Stovall, December is the most consistent month for gains for the S&P 500, with the greatest frequency of advances (batting average). It also has the lowest volatility – almost 40% below the average for other months since World War II.

During the month, the S&P MidCap 400 and SmallCap 600 outperformed other areas of the market, followed closely by the Utilities (XLU), Industrials (XLI), Materials (XLB), and Financials (XLF) sectors.

What is unique about this year is the election, which increases bullish sentiment. December historically ranks as the second-best month on the S&P 500 during election years, with an average return of 1.3% since 1950, according to an analysis by Ryan Detrick of the Carson Group.

His analysis also found that strong year-to-date performance often increases the chances that investors will chase the market through the end of the year. Of the past 10 times the S&P entered December up more than 20%, December posted an average gain of 2.4%.

Looking ahead, the potential for a Santa Claus rally — which is when stocks rise in the last five trading days of the year plus the first two trading days of the new year — could boost returns even further.

Stock Trader’s Almanac Editor-in-Chief Jeff Hirsch, who explains that Thanksgiving kicks off a series of strong bullish seasonal patterns for the market, recently wrote that he “combined these seasonal events into one trade: buy on the Tuesday before Thanksgiving and hold through the end of the week.” The second trading day of the new year. Since 1950, the S&P 500 has risen 79.73% of the time from the Tuesday before Thanksgiving to the second trading day of the year for an average gain of 2.58%.

And the good times on Wall Street may not stop there. While next year’s gains are likely to be more muted, many of Wall Street’s top strategists are becoming more optimistic. Last week, Pinky Chadha, chief global strategist at Deutsche Bank, set a year-end 2025 S&P 500 target of 7,000, which matches Yardeni Research’s target for most bullish calls tracked by Yahoo Finance.

StockStory aims to help individual investors beat the market.

Meanwhile, both Barclays and RBC Capital Markets have posted 2025 year-end targets of 6,600 for the S&P 500, and JPMorgan’s equities team is aiming for a year-end target of 6,500, up from 4,200 in the past two years.

One major catalyst will be the Trump administration’s market-friendly policies, Scott Sperling, co-CEO of THL Partners, told me recently.

“One of the things we expect with the new administration is a significant increase in growth potential in the overall economy and a reduction in the cost of doing business… The opportunity for all businesses will probably be greater with the new administration given the issues we have seen in the last four years,” he said.

While the future remains uncertain, the combination of historical performance, recent momentum, and optimism surrounding Trump’s economic policies indicates a favorable opportunity for investors to continue buying into the market.

Sean Smith He is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSSmith. Advice on deals, mergers, activist positions, or anything else? Email seanasmith@yahooinc.com.

Click here for the latest stock market news and in-depth analysis, including stock-moving events

Read the latest financial and business news from Yahoo Finance

DecembergainsmarketsProsRecordRUNsetsstagestock